Prentiss v. Allstate Ins. Co.

Decision Date09 November 1999
Docket NumberNo. Civ.1:99CV43.,Civ.1:99CV43.
Citation87 F.Supp.2d 514
CourtU.S. District Court — Western District of North Carolina
PartiesCharles B. PRENTISS, III and Margaret O. Prentiss, Plaintiffs, v. ALLSTATE INSURANCE COMPANY, Defendant.

Allan R. Tarleton, Asheville, NC, for plaintiffs.

Joseph P. McGuire, Asheville, NC, Mark L. Hanover, Steven M. Levy, Chicago, IL, for defendant.


THORNBURG, District Judge.

THIS MATTER is before the Court on the parties' objections to the Memorandum and Recommendation of United States Magistrate Judge Max O. Cogburn, Jr. Pursuant to standing orders of designation and 28 U.S.C. § 636, this Court referred Defendant's Motion to Dismiss and/or for Summary Judgment for a recommendation as to disposition. Both Defendant and Plaintiffs filed timely objections to the Memorandum and Recommendation. The Court affirms the recommendation and remands this action to state court.


The Court reviews de novo those portions of a Magistrate Judge's Memorandum and Recommendation to which specific objections are filed. 28 U.S.C § 636(b). The Court will not address general objections to the Magistrate Judge's final Recommendation. In this Circuit, de novo review is unnecessary "when a party makes general and conclusory objections that do not direct the court to a specific error in the magistrate's proposed findings and recommendations." Orpiano v. Johnson, 687 F.2d 44, 47 (4th Cir.1982). "The district judge must not be a rubber stamp" and "has a duty to reject the Magistrate Judge's recommendation unless, on de novo reconsideration, he or she finds it justified." 12 Wright & Miller, Federal Practice and Procedure § 3070.2 (1997). Those parts of a Magistrate Judge's Memorandum and Recommendation to which no specific objections are filed are given careful review. Orpiano, 687 F.2d at 47.


Plaintiffs Charles B. Prentiss and Margaret O. Prentiss are the named Plaintiffs in a class action suit brought against Defendant Allstate Insurance Company, an Illinois insurance company authorized to do business in North Carolina. Plaintiffs allege that Defendant, their automotive insurer, improperly increased their insurance premiums based on an accumulation of points under North Carolina's Safe Driver Incentive Plan ["SDIP"]. Plaintiffs contend this increase was improper under the Constitution of North Carolina due to the absence of a judicial adjudication of fault against them. The purported class of persons is comprised of all drivers in North Carolina insured by Defendant who had their "safe driver discount" removed without a judicial finding of fault. Complaint, at ¶ 2.

On September 22, 1997, Mr. Prentiss was involved in a motor vehicle accident on U.S. Highway 276 in Haywood County, North Carolina. Id., at ¶ 13. Patricia N. Former of Woodruff, South Carolina, drove the other vehicle involved in the accident. Neither driver was injured, but both vehicles were damaged. Id. Mr. Prentiss was charged in a citation with operating a motor vehicle "[b]y failing to see before turning from a direct line that such movement could be made in safety." Id. Mr. Prentiss contested the charge and the District Court of Haywood County dismissed it with no adjudication. Id., at ¶ 14.

Plaintiffs are insured under a motor vehicle liability policy issued by Defendant and had been insured under that policy for more than six months prior to the September 22, 1997, accident. Id., at ¶ 15. Following the accident, which involved property damage in excess of $2,000, Defendant determined that Mr. Prentiss had been at fault. Id., at ¶ 16. Pursuant to the North Carolina SDIP and the North Carolina General Statutes, Defendant eliminated Plaintiffs' "safe driver discount" and imposed a premium surcharge of three points. Id. Mr. Prentiss has continued to pay the increased premiums under protest. Id., at ¶ 17.


Plaintiffs filed a class action complaint in Haywood County Superior Court on February 1, 1999. The Complaint, which names only Allstate as a Defendant, effectively seeks a declaration that the North Carolina SDIP is unconstitutional under the state constitution. In addition, Plaintiffs seek reimbursement of the increased premium payments, injunctive relief restricting Defendant's ability to impose increased premiums, and attorney's fees. Plaintiffs seek this relief under three legal theories; first, Plaintiffs argue that the determination of liability or fault by Defendant, a private insurer, was an unconstitutional delegation of judicial power prohibited by Article IV, Section 1 of the Constitution of the State of North Carolina. Id., at ¶ 18. Second, Plaintiffs complain that the "imposition of increased premiums without adjudication of fault is an unconstitutional civil penalty" prohibited by Article I, Section 19 of the Constitution of North Carolina. Id. Finally, Plaintiffs contend, on information and belief, that the North Carolina Rate Bureau has not "provided reasonable means approved by the Commissioner of Insurance whereby any person who disputes his insurer's determination that he or she was at fault in an accident may be heard as required by North Carolina General Statute 58-36-1(2) and 58-36-65(h)." Id.

On notice by Defendant asserting complete diversity and an amount in controversy in excess of $75,000, the matter was removed to this Court on March 11, 1999. Defendant then filed a Motion to Dismiss and/or for Summary Judgment on April 7, 1999. Magistrate Judge Cogburn issued his Memorandum and Recommendations on July 9, 1999, recommending that the Court abstain from the matter under the Burford doctrine, or, in the alternative, grant Defendant's Motion to Dismiss.

Defendant filed a Motion for Reconsideration of the Magistrate Judge's recommendation on July 22, 1999, contending that abstention was improper. Plaintiffs timely filed an objection to the recommendation on July 26, 1999, taking issue with both the recommendation to abstain and the alternative recommendation to grant the Motion to Dismiss. On reconsideration, the Magistrate Judge did not substantively alter his recommendations. Order, filed August 5, 1999 (granting motion for reconsideration of Memorandum and Recommendation). Defendant timely filed an objection to the Memorandum and Recommendation on August 11, 1999.

A. Burford Abstention

Plaintiffs bring a state constitutional challenge to a statute which deals with the regulation of North Carolina's automobile insurance scheme. Federal courts should abstain from deciding questions of state law when federal review would disrupt a state's efforts to establish a coherent policy on a matter of substantial importance to a state. Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 813, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). The decision to abstain from exercising otherwise proper jurisdiction may and should be raised by the Court sua sponte.1 Pomponio v. Fauquier County Bd. of Sup'rs, 21 F.3d 1319, 1320 (4th Cir.1994) (affirming district court's sua sponte dismissal of action after abstaining from exercising jurisdiction), implicitly overruled on other grounds, Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996).

In Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943), the Supreme Court held that a federal district court, siting in equity may, in its discretion, "decline to exercise its jurisdiction in certain circumstances if abstention is necessary to show proper regard for a state government's domestic policy." Pomponio, 21 F.3d at 1324 (citing Burford, 319 U.S. at 317-18, 63 S.Ct. 1098). The Supreme Court later refined the requirements for a district court to abstain under Burford:

Where timely and adequate state-court review is available, a federal court sitting in equity must decline to interfere with the proceedings or orders of state administrative agencies: (1) when there are "difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar"; or (2) where the "exercise of federal review of the question in a case and in similar cases would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern."

New Orleans Public Serv., Inc. v. Council of New Orleans, 491 U.S. 350, 361, 109 S.Ct. 2506, 105 L.Ed.2d 298 (1989) ("NOPSI") (quoting Colorado River, 424 U.S. at 814, 96 S.Ct. 1236). The Supreme Court in NOPSI held that a Burford abstention was not proper in that case. However, the Court noted that "[t]his case does not involve a state-law claim, nor even an assertion that [the] federal claims are in any way entangled in a skein of state law that must be unraveled before the federal case can proceed." Id., 491 U.S. at 350-51, 109 S.Ct. 2506. Keeping in mind that no federal claims or issues are involved in the instant matter, the Court looks to the test set forth by the Supreme Court in NOPSI.

1. Timely and adequate state court review

The first step in the Burford abstention analysis is whether "timely and adequate state-court review" is available. Riley v. Simmons, 45 F.3d 764, 771 (3rd Cir.1995). "Only if a district court determines that such review is available, should it turn to the other issues...." Id. The Court finds "timely and adequate state-court review" is available to Plaintiffs under existing North Carolina law.

The North Carolina Administrative Procedure Act ("APA") provides detailed procedures for administrative review of agency actions followed by centralized judicial review. N.C.Gen.Stat. §§ 150B-1, 150B-64. The North Carolina Department of Insurance is considered an agency and is therefore subject to the provisions of North Carolina's APA. See e.g., In re Matter by McCrary, 112 N.C.App. 161, 435 S.E.2d 359 (1993). After informal attempts to settle a...

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